Investments In India: Why Investing Is Important And Where To Invest?

Investments In India: Why Investing Is Important And Where To Invest?

Investment is a daunting process for most people, right next to tax filing. While most people tend to rely on trusted friends and relatives who have a proven example from an investment, people also tend to miss out on other lucrative investment options. It is important as an informed investor to explore the vast spectrum of equity and fixed-income investments.

Importance of Investing

Investment is the second most important activity with your hard-earned money after saving. Just saving money is not enough and you need to invest with a company directly or indirectly to let it grow on its own. Idle money is a waste. While you let your money stay put in a savings bank account, it only earns a maximum of 4% interest calculated on a daily basis on the closing balance. It is credited half-yearly or quarterly depending on the bank. Unless you invest in specific small finance banks or newer banks, return on investment is in this vicinity only.

There are other instruments which can earn you a much higher rate of interest during the same period of time. While a savings account is the safest investment option because it has a bank guaranteeing the payments, there is a higher chance of other much lucrative instruments will almost equal guarantee of safety.

Thus, it is wise to look beyond a vanilla savings account and explore different types of investment options, such as –

  1. Equity shares
  2. ETFs
  3. Derivatives
  4. Real Estate
  5. Mutual Funds (all types)
  6. Bonds
  7. Fixed Deposits (NBFCs)
  8. Gold and Bullion

The first four in the list above are considered the riskiest class of assets. Mutual funds have all kinds of schemes – equity, hybrid and fixed income which can put it in a wide range of risk levels. The last three are considered one of the safest investment options.

As an investor, you need to assess various factors specific to you. This is called as Risk Assessment of an individual. A sum of these factors will tell you if you can and how much risk can you take your capital if you wish to invest in any of the first four options.

  1. Age
  2. Income levels and potential to increase
  3. Monthly Expenses and liabilities in terms of loans
  4. Number of dependents
  5. Health status

Risk Appetite Determination

Assets with high risks also help you achieve high gains. This is owing to the fact that they are not insured by any agency or government but the returns are determined by market demand and supply. If the stock of a company is reacting to positive news or the industry is doing well, you can earn very high returns on Investment in a short period of time. However, the same applies to bad news as well where you can lose a lot. Real estate is difficult in terms of transactions which create the risk. Mutual funds are an excellent way to keep your money invested yet, they carry market risk. Even debt funds have a risky element attached to it.

Once you determine your risk appetite, you can determine the asset class easily.

Safest Investment Option

Fixed Deposits are the safest investment option whether with a bank or NBFC. Many people are unaware and wary of company FDs because they are not guaranteed by the Reserve Bank of India or Deposit Insurance and Credit Guarantee Corporation (DICGC). They are however scrutinized on a 14-point system by credit rating agencies like CRISIL and ICRA on the payback capacity and timing. This is called as the creditworthiness of a company and instrument. Company FDs are also the highest paying investment options with 1-2% higher interest rate than bank FDs. Thus, it is essential to consider them part of your portfolio.

Choose one of the most reliable company FD like Bajaj Finance FD which has FAAA/rating by CRISIL and MAAA/rating by ICRA, making it one of the best company FDs in the market. Bajaj Finance FD also offers high interest rates ranging from 8% to 8.9% for all customer types and tenors. It offers various other benefits such as flexible tenor, periodic interest payouts, online account management, premature withdrawal and loan against FD.

Company FD like Bajaj Finance FD should be a part of every investor’s portfolio (irrespective of age, risk appetite, etc.) as it helps offset the risk of other market-linked investment options and ensures high-growth in the long-term.